Mark Allen Schmidt Colorado Mortgage Broker & Educator HECM for Purchase Consultant

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1 Mark Allen Schmidt Colorado Mortgage Broker & Educator HECM for Purchase Consultant A Summary Of How A HECM for Purchase Works (Home Equity Conversion Mortgage) A person 62+ years old can use a FHA Reverse Mortgage to purchase a primary residence. The loan works like this; the borrower provides a one-time down payment of roughly half the purchase price of the home (or less), the remainder of the purchase price is paid by a Reverse Mortgage. Once the deal is closed, the buyer owns the home and they are not required to make any further payments as long as they live in the home. HECM Financing: Down payment + Reverse Mortgage = 100% The Requirements -Borrowers must be 62 years of age or older (Can qualify with an under 62 spouse) -The home being purchased must be the primary residence -Property must meet FHA property guidelines -Borrower can only have one FHA financed property The Benefits -Qualification is not based on credit or income (financial assessment may be required as of 3/15) -The borrower can purchase substantially more home -No monthly payments are required -Independence they can stay in a home they own, as long as they wish -Helps seniors buy the home they really want - not just one they can finance or cash purchase -A HECM/Reverse Mortgage is not counted as income for taxes and most Govt programs Qualified Property Types -Single Family homes and 2 to 4 units -Attached PUD homes (townhouses)

2 -FHA approved condos -Qualified manufactured homes on fixed foundation with HUD tags and Data plate info. -New construction must have a CO (Certificate of occupancy) Earnest Money Down Payment -Closing Costs (all funds including earnest money are subject to FHA asset verification guidelines) Acceptable source of funds: -Personal Funds (Savings, investments, personal assets) -Sale of current home -Acceptable gift funds Unacceptable Source of funds: -Bridge loans, personal loans or subordinate liens (No 2nd liens permitted) -Builder incentives, sweat equity or rent credits -Seller concessions, seller carry or gift from an unacceptable party The Purchase Contract -Realtors write a FHA purchase contract specifying a HECM for purchase -Sellers must be current owners of record -Seller must own home for 90 days from previous sale (Flipping rules apply) -Seller can only pay their part of normal and customary costs -The purchase contract will be reviewed prior to application to ensure it meets HUD guidelines

3 Purchase Contract Checklist (All buyers must attend HUD approved counseling) -A sales contract signed by the buyers, sellers and the realtors. -The buyer must occupy the home withing 60 days of closing -Signed Amendatory clause and real estate certificate -Contingency for sale of current home -Seller must pay for all required repairs -Copies of any seller provided inspections -Seller cannot pay any of the borrowers closing costs -Canceled earnest money check -Seller must be current owner (90 day no-flipping rules apply) -Borrowers/buyers must document source of funds -If buyers are keeping their current residence, they must show income-insurance & financial ability to maintain property -Credit report required for non-borrowing spouse* *Non-borrowing spouse details A 62+ person can purchase with an under 62 (nonborrowing spouse) The cash down payment will be based on the age of the nonborrowing spouse. Title will be held in both names and the non-borrowing spouse will be able to stay in the home after the borrowing spouse dies or can no longer live in the property.

4 A Few Reverse Mortgage Purchase Scenarios How Much Down Payment It Will Take To Buy With A Reverse Mortgage An explanation of the Pie Chart: -Equity Reserves: Down Payment Less Fees and FHA Up Front MIP Insurance -Financing Fees: Title, taxes, ordinary closing costs -(+$410 POC) the appraisal cost -Insurance Fees: FHA Up Front MIP, 2.50% of purchase price -Part of Purchase Paid From Reverse Mortgage: New reverse mortgage loan balance All down payment numbers are estimates only, not a commitment to lend Age 62, $200,000 purchase: Down Payment: $103,000* (About 51%) *Equity Reserves + Financing Fees + Insurance Fees Age 70 $200,000 purchase Down Payment: $93,000 (About 47%)

5 Age 62 $250,000 purchase Down Payment: $129,000 (About 51%) Age 70 $250,000 purchase Down Payment: 116,000 (About 47%) Age 62 $350,000 purchase Down Payment: $179,000 (About 51%)

6 Age 70 $350,000 purchase Down Payment: $161,000 (About 47%) 95% of all HECM / Reverse Mortgages originated in the USA are HECM for Purchase loans. It looks like Realtors, buyers and lenders have figured this one out. In the USA there are 10,000 people turning 62 every day, those people need to know about the HECM for purchase program. There is a lot more information on my website: I also offer a free, 2 hour CE course for Colorado Realtors. (DORA approved) Call me to schedule a class for your office, Realty Team, or Title company. Thanks, Mark Allen Schmidt